[Federal Register Volume 71, Number 113 (Tuesday, June 13, 2006)]
[Rules and Regulations]
[Pages 34009-34011]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-5349]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 1 and 602

[TD 9258 and TD 9264]
RIN 1545-BE86; RIN 1545-BF26


Guidance Under Section 1502; Amendment of Tacking Rule 
Requirements of Life-Nonlife Consolidated Regulations; and Guidance 
Necessary To Facilitate Business Electronic Filing and Burden 
Reduction; Correction

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Correcting amendment.

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SUMMARY: This document contains corrections to temporary regulations 
(TD 9258) that were published in the Federal Register on Tuesday, April 
25, 2006 (71 FR 23856) relating to guidance regarding amendments to 
tacking rule requirements of Life-Nonlife consolidated regulations 
under section 1502; and final and temporary regulations (TD 9264), that 
were published in the Federal Register on Tuesday, May 30, 2006 (71 FR 
30591) relating to guidance necessary to facilitate business electronic 
filing and burden reduction.

DATES: The amendment to Sec.  1.1502-76T that published April 25, 2006, 
is effective April 25, 2006. The amendments to Sec. Sec.  1.1563-1 and 
602.101 and the removal of Sec.  1.1502-76T that published May 30, 
2006, is effective May 30, 2006.

FOR FURTHER INFORMATION CONTACT: Grid Glyer, (202) 622-7930 (not a 
toll-free number).

SUPPLEMENTARY INFORMATION:

Background

    The temporary regulations (TD 9258) and final and temporary 
regulations (TD 9264) that are the subject of these corrections are 
under sections 332, 351, 355, 368, 1081, 1502, and 1563 of the Internal 
Revenue Code.

Need for Correction

    As published, TD 9258 and TD 9264 contain errors that may prove to 
be misleading and are in need of clarification. TD 9264 added Sec.  
1.1502-76T in error, as Sec.  1.1502-76T was previously codified by TD 
9258. This correcting amendment amends Sec.  1.1502-76T as codified by 
TD 9258, and removes Sec.  1.1502-76T as codified by TD 9264.

List of Subjects

26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

26 CFR Part 602

    Reporting and recordkeeping requirements.

Correction of Publication

0
Accordingly, 26 CFR parts 1 and 602 are corrected by making the 
following correcting amendments:

PART 1--INCOME TAXES

0
Paragraph 1. The authority citation for part 1 continues to read in 
part as follows:

    Authority: 26 U.S.C. 7805 * * *


0
Par. 2. Section 1.1502-76T published on April 25, 2006, as TD 9258 is 
amended by revising paragraphs (b) through (c)(3) and adding paragraph 
(d) to read as follows:


Sec.  1.1502-76T  Taxable year of members of group (temporary).

* * * * *
    (b) through (b)(2)(ii)(C) [Reserved]. For further guidance, see 
Sec.  1.1502-76(b) through (b)(2)(ii)(C).
    (D) Election--(1) Statement. The election to ratably allocate items 
under paragraph (b)(2)(ii) of Sec.  1.1502-76 must be made in a 
separate statement entitled, ``THIS IS AN ELECTION UNDER Sec.  1.1502-
76(b)(2)(ii) TO RATABLY ALLOCATE THE YEAR'S ITEMS OF [INSERT NAME AND 
EMPLOYER IDENTIFICATION NUMBER OF THE MEMBER].'' The election must be 
filed by including a statement on or with the returns including the 
items for the years ending and beginning with S's change in status. If 
two or more members of the same consolidated group, as a consequence of

[[Page 34010]]

the same plan or arrangement, cease to be members of that group and 
remain affiliated as members of another consolidated group, an election 
under this paragraph (b)(2)(ii)(D)(1) may be made only if it is made by 
each such member. Each statement must also indicate that an agreement, 
as described in paragraph (b)(2)(ii)(D)(2) of this section, has been 
entered into. Each party signing the agreement must retain either the 
original or a copy of the agreement as part of its records. See Sec.  
1.6001-1(e).
    (2) Agreement. For each election under Sec.  1.1502-76(b)(2)(ii), 
the member and the common parent of each affected group must sign and 
date an agreement. The agreement must--
    (i) Identify the extraordinary items, their amounts, and the 
separate or consolidated returns in which they are included;
    (ii) Identify the aggregate amount to be ratably allocated, and the 
portion of the amount included in the separate and consolidated 
returns; and
    (iii) Include the name and employer identification number of the 
common parent (if any) of each group that must take the items into 
account.
    (b)(2)(iii) through (c) [Reserved]. For further guidance, see Sec.  
1.1502-76(b)(2)(iii) through (c).
    (d) Effective date--(1) Applicability date--(i) Paragraph (a) of 
this section applies to any original consolidated Federal income tax 
return due (without extensions) on or after April 25, 2006.
    (ii) Paragraph (b)(2)(ii)(D) of this section applies to any 
original consolidated Federal income tax return due (without 
extensions) after May 30, 2006. However, a consolidated group may apply 
this section to any original consolidated Federal income tax return 
(including any amended return filed on or before the due date 
(including extensions) of such original return) timely filed on or 
after May 30, 2006.
    (2) Expiration date--(i) The applicability of paragraph (a) of this 
section will expire on April 25, 2009.
    (ii) The applicability of paragraph (b)(2)(ii)(D) of this section 
will expire on May 26, 2009.


Sec.  1.1502-76T  [Removed]

0
Par. 3. Section 1.1502-76T published on May 30, 2006, as TD 9264 is 
removed.
0
Par. 4. Section 1.1563-1 is amended by adding paragraph (c)(2)(iv) and 
revising paragraph (e) to read as follows:


Sec.  1.1563-1  Definition of controlled group of corporations and 
component members.

* * * * *
    (c) * * *
    (2) * * *
    (iv) The provisions of this paragraph (c)(2) may be illustrated by 
the following examples (in which it is assumed that all the individuals 
are unrelated):

    Example 1.  On each day of 1970 all the outstanding stock of 
corporations M, N, and P is held in the following manner:

----------------------------------------------------------------------------------------------------------------
                                                                                   Corporations
                           Individuals                           -----------------------------------------------
                                                                    M (percent)     N (percent)     P (percent)
----------------------------------------------------------------------------------------------------------------
A...............................................................              55              40               5
B...............................................................              40              20              40
C...............................................................               5              40              55
----------------------------------------------------------------------------------------------------------------

    Since the more-than-50-percent stock ownership requirement of 
section 1563(a)(2)(B) is met with respect to corporations M and N 
and with respect to corporations N and P, but not with respect to 
corporations M, N, and P, corporation N would, without the 
application of this paragraph (c)(2), be a component member on 
December 31, 1970, of overlapping groups consisting of M and N and 
of N and P. If N does not file an election in accordance with Sec.  
1.1563-1T (c)(2)(i), the Internal Revenue Service will determine the 
group in which N is to be included.
    Example 2.  On each day of 1970, all the outstanding stock of 
corporations S, T, W, X, and Z is held in the following manner:

----------------------------------------------------------------------------------------------------------------
                                                                   Corporations
           Individuals           -------------------------------------------------------------------------------
                                    S (percent)     T (percent)     W (percent)     X (percent)     Z (percent)
----------------------------------------------------------------------------------------------------------------
D...............................              52              52              52              52              52
E...............................              40               2               2               2               2
F...............................               2              40               2               2               2
G...............................               2               2              40               2               2
H...............................               2               2               2              40               2
I...............................               2               2               2               2              40
----------------------------------------------------------------------------------------------------------------

    On December 31, 1970, the more-than-50-percent stock ownership 
requirement of section 1563(a)(2)(B) may be met with regard to any 
combination of the corporations but all five corporations cannot be 
included as component members of a single controlled group because 
the inclusion of all the corporations in a single group would be 
dependent upon taking into account the stock ownership of more than 
five persons. Therefore, if the corporations do not file a statement 
in accordance with Sec.  1.1563-1T (c)(2)(ii), the Internal Revenue 
Service will determine the group in which each corporation is to be 
included. The corporations or the Internal Revenue Service, as the 
case may be, may designate that three corporations be included in 
one group and two corporations in another, or that any four 
corporations be included in one group and that the remaining 
corporation not be included in any group.
* * * * *
    (e) [Reserved]. For further guidance, see Sec.  1.1563-1T(e)(1).

PART 602--OMB CONTROL NUMBERS UNDER THE PAPERWORK REDUCTION ACT

0
Par. 5. The authority citation for part 602 continues to read in part 
as follows:

    Authority: 26 U.S.C. 7805.


Sec.  602.101  [Amended]

0
Par. 6. Section 602.101, paragraph (b) is amended by removing the 
entries for

[[Page 34011]]

1.332-6, 1.351-3, 1.355-5, 1.368-3, and 1.1081-11.

Cynthia E. Grigsby,
Senior Federal Register Liaison Officer, Publications and Regulations 
Branch, Associate Chief Counsel, (Procedure and Administration).
[FR Doc. 06-5349 Filed 6-8-06; 3:47 pm]
BILLING CODE 4830-01-P